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Santa Monica City Yards Project Gets High Bond Rating

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By Jorge Casuso

July 13, 2021 -- One of the "Big Three" credit rating agencies announced Tuesday it has given a AA+ rating to the bonds that will help complete Santa Monica's City Yard's modernization project.

The high score from Fitch Ratings, Inc. should facilitate the sale of the approximately $63 million in bonds scheduled to be offered next week.

Standard & Poor's -- one of the two other agencies -- is expected to announce its rating soon, while Moody's doesn't rate the type of bonds that will finance the $114 million project, City officials said.

Fitch's rating "is driven by the exceptional resilience of the city to periods of economic stress, underpinned by its very high reserves" and "a strong expenditure framework," the agency said.

"Fitch expects the city will utilize various policy tools to manage short-term revenue pressures from reduced tourism demand and stabilize its financial operations at a very high level."

The project will modernize the outdated site at 2500 Michigan Avenue the City took over in the late 1940s as the base for municipal maintenance services, including water, resource recovery and recycling, fleet maintenance and fire training.

The 14.7 acre site houses 16 buildings and structures erected over the years and has "become woefully outdated, unsafe and a poor fit for today’s operational demands," according to City officials.

Replacing the City Yards will take place in phases as the old structures are demolished and new buildings put up, officials said.

The new facilities will relocate staff currently scattered throughout the site and make it easier to safely travel through the modernized yards using different modes of transportation.

The updated site -- which also houses storage facilities -- will use current building standards and meet the City's goal of Net Zero Energy use, officials said.

In announcing its rating, Fitch cited Santa Monica's handling of the economic blow dealt by the impacts of the coronavirus shutdown, including cutting its workforce by about 300 positions.

"The city of Santa Monica's financial position remains strong despite sharp revenue losses experienced during widespread closures of its tourism, retail, dining and entertainment sectors due to coronavirus pandemic mitigation efforts.

"The city came into the downturn exceptionally well prepared in terms of underlying operating margins, government funding levels and reserves, and it has repeatedly taken forceful action to align spending with available resources," the agency wrote.

"Federal aid has also helped the city bridge the fiscal gap caused by the pandemic."

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